Wareagle

[JOSHNAUDI]

WarEagle

Can you make heads or tails of this cotton market. South Texas Crop will be creeping up on us before you know it and with last years crop still in abundance it should make for an interesting 2003-04.

Any insight or your opinion would be appreciated.


Thanks
Josh Schwartz
American Cotton Suppliers Int. II

 

[wareagle]

The cotton market has lost almost 5 cents in three days and almost 10 cents in two weeks. A sharp decline in any market. Nevertheless the cotton market has been one of the only strong markets in the past two years. It has rebounded over 100% since the 28c low two years ago. With all that aside it is not good that it hasn't rebounded from any of these declines. Volume is high and the specs are running for the high hills. 62000 contracts in the last two days is astronomical. The specs have gone from over 50%long two weeks ago to mabeye 10-15% this week. Another main reason for the decline is China. Their buying has completely dried up after being very, very active in Jan, Feb, Mar. As china goes the market ussually follows suit. I would imagine most farmers are kicking themselves for not fixing their cotton two weeks ago. Australia's crop is a little like a mem/texas crop. We have seen everything from 11 38 G5 to 52 31 G6. Normally they have a SM to Midd crop, not his year. All this is contributed to a lack of rain and of course rains right when the cotton opened in Feb. Next year doesn't look as bad, but still low. I'm coming back to the states next weekend for american cotton shippers assoc meetins in boston. Should be a good time.

 

[wareagle]

I forgot to add the SARS fears in asia as also being a driving force in driving the market south. everyday cotton people don't understand the importance of Asia and China's importance to the market. The folks over there seem to have started to contain this virus after it looked like it couldn't be stopped. Look for a nice rebound today in futures prices.

 

[JOSHNAUDI]

I appreciate the input. Thought I'd pass on an email from one of our mid east agents.

"THIS IS TO INFORM YOU THAT DUE
TO THE ALMOST COLLAPSE OF N.Y.
FUTURES, BUYERS HAVE PRESENTLY ALL
WITHDRAWN TO SIDELINES AND OBSERVING
THE MARKET, ANTICIPATING FURTHER
DECLINES IN WORLD PRICES.

DON,T THINK IT CAN FURTHER GO DOWN BY
A MAXIUMUM OF 100-200 POINTS??????
UNLESS SOMETHING DRASTIC HAPPENS NOT
TO OVERCOME THE SARS VIRUS IN THE
FAR EAST.

WE AWAIT YOUR COMMENTS AND VIEWS,"

from a different agent

"Indonesean mills still opted to see NYF
prices developing on account of
continious market decline. The mills are
still very cautious specially US growth."

I was thinking about the 28.00 cent low but back then we had almost two months of 6-8 cent Step 2. Plus Ocean Freight to Hong Kong was at $400 a container and inland (W TX - W Coast) at $720. $14 a bale to get it there with $30 a bale lowend step 2 coming back sure made it easy to sell 30 cent cotton.
This year we're looking at $500 OF and $1075 inland and my guess sub 5 cent Step 2 by the end of the day. That drops us down to $5 a bale to work with that seems to get eaten up in stop off charges because we can't find 85 bales same quality sold together. (Of course I blame you big guys) Personally, I think the power shift to the farmers is mainly to blame. With very little incentive to sell (Gov't Loan) it sure looks like many are getting greedy. Hence the lack of fixation 3 weeks ago. Why have a market if it does not contribute to the purchase price of cotton.

Due to ignorance, If you ever get some time , I'd be interested in hearing what Australia does with their cotton. Imp/Exp, Consumption, stuff like that. I know I have a couple of mills in our system but we haven't shipped anything that way in at least 4 years.

Have a good time in Boston